Good evening and welcome to the Enova International second quarter 2016 earnings conference call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please also note that this event is being recorded. I would now like to turn the conference over to Monica Gould, Investor Relations for Enova International. Please go ahead.

Thank you Andrea and good afternoon everyone. Enova released results for the second quarter of 2016 ended June 30, 2016 this afternoon after the market close. If you did not receive a copy of our earnings press release, you may obtain it from the Investor Relations section of our website at ir.enova.com. With me on today's call are David Fisher, Chief Executive Officer and Steven Cunningham, Chief Financial Officer. This call is being webcast and will be archived on the Investor Relations section of our website. Before I turn the call over to David, I would like to note that today's discussion will contain forward-looking statements based on the business environment as we currently see it and as such, does include certain risks and uncertainties. Please refer to our press release and our SEC filings for more information on the specific risk factors that could cause our actual results to differ materially from the projections described in today's discussion. Any forward-looking statements that we make on this call are based on assumptions as of today and we undertake no obligation to update these statements as a result of new information or future events. In addition to U.S. GAAP reporting, we report certain financial measures that do not conform to generally accepted accounting principles. We believe these non-GAAP measures enhance the understanding of our performance. Reconciliations between these GAAP and non-GAAP measures are included in the tables found in today's press release. As noted in our earnings release, we have posted supplemental financial information on the IR portion of our website. And with that, I would like to turn the call over to David.

Good afternoon everyone. Thanks for joining our call today. I am going to start by giving a brief overview of the quarter and I will update you on some of our initiatives and finally I will share our perspectives looking forward. After my remarks, I will turn the call over to our new CFO, Steven Cunningham, to discuss our financial results and guidance in more detail. We are again pleased with the solid performance we generated during the second quarter and the continued momentum we are seeing at Enova. In addition to another quarter of strong financial results, we are successfully executing on our strategy of growing our core businesses, while further developing our new initiatives to generate additional future growth. We attribute for continued success to the quality of our talented employees and our extensive experience serving subprime and nearprime borrowers. We have been in business for over 12 years, longer than any other online lender and during this time, we have successfully navigated a number of economic cycles as well as substantial regulatory changes. This experience, combined with a growing diversification of our business, positions us very well to manage through the forthcoming regulatory changes in the U.S., which I will talk about in more detail shortly. But before I get to that, for the second quarter, revenue was $172.5 million, an increase of 18% from Q2 of last year and above our guidance range of $155 million to $170 million. The second quarter is not always a strong quarter for lending, but we saw good demand across almost all of our products. In particular, we were able to attract a large number of new customers, both in the U.S. and the U.K. As I briefly mentioned a moment ago, solid credit performance was another highlight of the…

Thank you David and good afternoon everyone. I am really excited to be part of Enova. I have been very impressed with how the talented team here is leveraging the power and experience of our technology and analytical platforms to help hard-working people fulfill their financial responsibilities with fast trustworthy credit. I will review our financial and operating performance for the second quarter and then provide our outlook for the third quarter and full year 2016. As David mentioned, second quarter results are a reflection of solid execution across our core U.S. and U.K. products, the continued growth of new diversification initiatives and stable loan performance. Total revenue was $172.5 million in the second quarter, a 17.9% increase from the year ago quarter and above our guidance range of $155 million to $170 million. On a constant currency basis, total revenue increased 19.5% compared to the prior year quarter to $174.9 million. Total company revenue rose with strong origination volume and increases in outstanding receivables balances. Total company origination volume increased 16.2% on a year-over-year basis and 15.6% sequentially in the second quarter. That drove in the total company loans and finance receivable balances of $595 million. That's up 48.7% from $400.3 million in the second quarter of last year and 13.8% sequentially. New customer acquisitions continued to play a significant role in our performance. The dollar amount of new customer loan originations during the quarter was the highest in Enova's history with strong growth across all significant products. Domestic revenue accounted for 81% of total revenue in the quarter and rose 24% on a year-over-year basis to $140.3 million. In particular, year-over-year revenue growth for domestic installment loans and receivables purchase agreements and for line of credit products increased 39% and 46% respectively, as both categories saw a significant…

Great. Thanks Steve. That is the end of our prepared remarks for to. We will now open the call up to any questions.

We will now begin the question-and-answer session. [Operator Instructions]. Our first question comes from David Scharf from JMP Securities. Please go ahead.

Good afternoon. Thanks for taking my questions. Dave, one is more just a clarification on the impact of the Google AdWords ban which you noted. Your reference to it representing an extremely small part of your new customer volumes, does that relate to just the ones the Enova directly acquirers? Or does that also relate to the 50% or more of your customers that come through lead gen? Do you have a sense what the overall impact is?

Sure. So I was referring to the ones we get directly. The ones we get from the lead providers, we don't typically have great visibility in how they acquire the leads that they are passing on to us. But as I mentioned, since the rule has become effective, we have maintained good volumes across almost all of our marketing channels, including leads us and lead providers are adapting to the new Google policies.

Got it. That's helpful. Shifting just to the credit side, it seems like sequentially and usually a tax refund season, Q1 is a good paydown quarter, but you definitely saw some very strong improvement in credit quality going from Q1 to Q2, particularly looking at the loss rates for both line of credit and installment. It seems almost a littler counterintuitive given how many new customers you are adding. Can you provide any color on just what you are seeing out there in terms of customer behavior, payment patterns and the like?

Yes. We are seeing just good solid credit performance and some of it in installment portfolio is the impact of our nearprime products, but really across all of our portfolios. Our models are working really well. We have added a ton of additional data fields over the last couple of years. I think a lot of that work is really paying off now with really strong performance. The new customer volume is strong and that could, in different circumstances, negatively impact credit, but we still get the bank of our business from returning customers, but we are seeing good credit performance across both of those pockets, both returning customers and new customers.

Got it. And I will ask just one more and get back in the queue. Steve had addressed this in his prepared remarks on your funding availability. I just want to be clear, based on how rapidly the NetCredit product is growing, which is not self funding, per se, should our takeaway be that based on the availability of the securitization facility as well as the undrawn credit facility that you feel comfortable with your current liquidity to meet the growth targets that are embedded in your full year guidance?

Yes. Absolutely. And the way we look at our business is, the bulk of our products, a large majority of our product are self funding. We don't need access to outside credit to grow them at any conceivable reasonable growth rate. The one product that doesn't fit into that pocket is NetCredit. So we think about that as a completely separate business that requires separate funding. To-date, we have looked to our securitization facility for funding for that NetCredit business. We do, as Steve mentioned, still have plenty of headroom under that facility. But also as we have talked about, as we get into Q3 and end of Q3, beginning of Q4, we will be looking at additional capacity to fund NetCredit going forward. The good news is that we seem to have good relationships with our existing lenders, investors under our NetCredit securitization, but even more importantly NetCredit product is working well with good credit. And so we think there is a pretty strong appetite for that product in the market today. As far as to change going forward, there is some kind of financial crisis down the road and securitization market were to dry up, again our remedy is to just slow the growth of NetCredit. So the bulk of our other products, all of our other product are self funding. It's not the type of business where we could end up in a liquidity crunch. We can turn off new originations in NetCredit overnight. So we never liked to be reliant on third-party for anything in this world, but we think that we are in a pretty good place with where we are with NetCredit and how we view that growth going forward.

Got it. And this is just maybe a follow-on from that as I look at it, as I haven't dug into all the balance sheet items. But given how quickly NetCredit has been growing, including sequentially, how is the securitization balance? How does it actually get drawn down a bit from Q1? It looks like it actually closed with a lower balance than it was at the end of March.

Because the way it works, as those loans get paid down, the facility actually decreases in size giving us additional headroom under that facility. So it kind of has a mini evergreen feature built into it.

Got it. Okay. Thank you very much.

Our next question is from Bob Ramsey with FBR. Please go ahead.

Hi. Good afternoon. You may have given this, but do you have the actual NetCredit balances and originations for this quarter?

Well, hang on one quick second.

Sure. While you dig that up, I am curious about the yield as well.

Hang on.

Is that originations for the quarter?

And I guess maybe while you look for those numbers, I had one other question I had for you. I know David you mentioned, that there have been negative trends this quarter which had impacted other lenders in the space and obviously there was a fair amount of that. I am just curious on what you see as what you guys are doing differently? How you have really been able to grow your originations and balances while others have had to pull back? Compare and contrast a little bit about where you guys are succeeding where others are faltering?

Yes. I really think some of the other online lenders in the space just grew too quickly and their credit models weren't fully developed. They didn't have the data. They didn't have the experience to keep up with their growth in their originations volumes. And before Lending Club had some of their internally generated problems with their CEO, they were already having credit issues with their D and E tiers. We just have a lot more experience, having been at this for 12 years. Through the hundreds of iterations that our credit models have been through, in many, many terabytes of internal customer data we have collected plus really I think one of our strength is our ability to go out and get external data and to integrate that into our model. So a combination of being a little bit more slow and steady but also that experience over time. It has paid off. But there were certainly times as we were growing our NetCredit business when we looked out at our competitors and saw how much quickly they were growing their nearprime portfolios and wondered if we should be going faster. But having done this before and having grown businesses before, we knew at the pace that we were comfortable with and we made sure not to push it and I think now that's starting to pay off. Good. I think Steve, you have those numbers now, the total originations and the yield for the NetCredit?

I do. Our total originations, $85 million. And the yield, just under 60%.

Great. And do you have the balance at quarter-end?

For all of NetCredit, $232 million.

Great. I appreciate that. Last question and I will hop out. But I know you talked a little bit about financing and funding of the business. Could you maybe just touch on the change in the leverage ratio covenants that I think you guys had disclosed at the end of June or early July, for got the exact timing, but what it was that led to the change in those covenants?

Yes. Sure, Bob. If you go back and look at our facility, there was an original covenant at 3.0 to 1 and that was set back in mid-2014, really before we went through some of the changes in the U.K. And if you think back, we actually did modify that covenant in Q4 of last year and Q1 of this year. So rally what we did is continued to continue that trend of making sure that we prudently modify the covenant for the rest of this year.

Okay. All right. Great. Thank you very much.

Thanks Bob.

Our next question comes from John Rowan with Janney. Please go ahead.

Good afternoon guys.

Hi John.

Last quarter you gave a number, I just want to make sure I am framing this up correctly using the correct number. You gave a number of total revenue from new products, I think, you said earlier in the call, David, that it was 73%. Is that correct on an apples-to-apples basis?

I am not sure. No, I don't think I said in this call. I am not sure exactly what you are referring to. Total revenue from new products, the percentage of total revenue?

Yes. So just new initiatives, NetCredit new initiatives. I believe you said in the first quarter it was 23% of revenue. Am I missing something?

Yes. We will have to get back to you. I can't remember disclosing that in the first quarter. We didn't have that in the remarks this quarter. But we can get back on that.

And then to go back to the competitive front, did you see a pick up after Lending Club changed its pricing model? Or was it more from them pulling back? Or do you have any sense as to really what drove you up and frankly benefiting your competitive position?

Yes. Look, we did see strong demand in Q1. Q1 is the first time we really noticed the shorter than expected demand and that was the same time when we started seeing, Prosper, Lending Club and then than later Avant have disclosed issues, credit issues and funding issues and those have an effect of slowing their lending. So it's certainly easy to, I would say that's causation and it very well maybe. It's very difficult to determine in consumer demand driven businesses where the demand is coming from. We don't have a huge overlap in our customer base with those businesses, especially outside of NetCredit and as I mentioned before, we have seen good demand across all of our products. But the timing certainly does line up and I think we would be fooling ourselves to say that some of the strength in demand, particularly in NetCredit in Q1 and Q2, was from the pulling back from some of our competitors.

And do you think that, even some of the credit problems that you alluded to, at some of your competitors, do you think that there is any type of impact to your ability to access the ABS market? People are going to draw comparisons with your model. Obviously when Avant came out, they did [indiscernible] deal. It seemed like there was going to be more and more participation in the ABS market for unsecured consumer debt. I am just curious if you think there has been any change in that front as some of your competitors frankly have faltered? And that's it for me.

Yes. We don't think so. We are having good conversations out there and having steady profitable quarters behind us, having good credit in our portfolios, I think that's exactly the kind of product investors want. Yields in U.S. are incredibly low and people are dying to find good opportunities for yield. And that's what our ABS products can offer. So in the conversations we are having plus looking at the macroeconomic environment more broadly, we think that that market is still available to good issuers with good product.

All right. Thank you.

Thanks.

[Operator Instructions]. Our next question comes from Tom White of Macquarie. Please go ahead.

Great. Thanks. Just I wanted to try and reconcile some of your comments about the competitive landscape and sort of you guys said about marketing expense in 2Q and looking forward. Presumably, when guys like Avant and some of from of your peers are sort of experiencing these disruptions, they are probably pulling back in marketing. So are you guys just kind of increasing marketing here to just opportunistically put the pedal down and fill the void left by the pull back of some of your competitors? Or is there some other dynamic that's forcing you guys to raise marketing? And then just on the CFPB stuff, I hopped on late, so I apologize if I missed this, but any update on discussions you guys might be having with states where maybe you are not operating? Any sense whether space states that maybe haven't allowed this type of product might shift gears given the fact that the ruling maybe provide a bit of cover for them to be so? Thanks.

So I think on the first question, I think we saw good opportunity to get customers and so we spent on marketing. Again, the bulk of our businesses do not compete with Lending Club, Prosper and Avant, whether it's our subprime single pay products in the U.S., our U.K. products, Brazil, small business. We are not competing with those businesses here. So it's not their pulling back, it wouldn't impact those businesses and I don't think we saw stuff pulling back of the competitors to our subprime businesses. But do we think it helped NetCredit product in the quarter? For sure. And is there a very small overlap? With maybe some of our subprime products, yes. But we had an abnormally low percent of marketing, as a percentage of revenue in Q1. And so we expect it to be higher in Q2. It was higher in Q2. But we got a lot more customers. So it's much more efficient in Q2 than we expected. Cost per funded account and a metric we watch internally was much lower in Q2 than we expected. So we saw good opportunity to get good high quality loans and we took it by spending that marketing money. With respect to your second question, with the CFPB new rules, a couple of interesting things are going to happen with respect to the state where we don't operate today. I think one is, you have your legal and tribal lenders operating in the stats that the CFPB is pretty adamant that they are going to crackdown on those guys. I think the second is, look, it can't get any worse for us in those states and it has the opportunity to get better if those states say, okay look now there is Federal oversight that gives us some comfort to put in enabling legislation. And there are a number of states where that's a possibility. And so I think we are more optimistic than we have been in recent years that we get three or four additional states. But that's probably closer to the implementation of the CFPB rules, two or three years out. In the meantime, it's likely to be a one-off. We did have a one-off this year. We added Mississippi, which is a really nice addition. There could be others in the interim. But yes, I do see it could be potentially being a catalyst to add a handful of states. We are never going to get all the states. I think the Northeast will continue to remain tough. But a few additional states can definitely have a meaningful impact.

Thanks.

Yes.

This concludes our question-and-answer session. I would like to turn the conference back over to David Fisher for any closing remarks.

Great. Thanks so much for joining us today. We look forward to updating you on our progress next quarter. Talk to you guys soon. Thank you.